Gaining Momentum

Are there many paths to cost control?

Gainsharing might be picking up steam. The feds – initially very skittish about the whole thing – appear to be loosening the reins. Earlier this year, Congress granted the Center for Medicare and Medicaid Services the authority to launch six demonstration projects beginning in January 2007 and concluding in December 2009. And, as the concept becomes mainstreamed, some hospitals reportedly are proceeding on the advice of their legal counsel, that is, without explicit advisory opinions from the government.

But not everyone is convinced of the merits of gainsharing. Manufacturers, for example, say that the concept will stifle medical products innovation, while others fear that it will encourage doctors to sacrifice quality of patient care. Advocates, on the other hand, maintain that with good data and safeguards, gainsharing is an effective way to get hospitals and doctors to work together to reduce costs while maintaining or even improving patient care.

Spike of activity
Gainsharing is a tricky proposition. By law, hospitals are prohibited from paying physicians to reduce services to Medicare patients. If gainsharing were to induce physicians to skimp on services or supplies, it would be illegal. Furthermore, the Medicare anti-kickback statute prohibits hospitals from paying physicians to refer patients to their facilities. If gainsharing agreements were to induce physicians to steer patients to particular institutions, they could lead to violations of the statute. That’s why the government has tread cautiously.

Largely through the efforts of Joane Goodroe, president of Goodroe Healthcare Solutions, Norcross, Ga., the concept hit the spotlight in 2001, when the Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS) issued an advisory saying that it would not stand in the way of one hospital’s proposed gainsharing plan. (Irving, Texas-based VHA Inc. acquired Goodroe Healthcare Solutions in October 2005.)

Interest spiked again in February 2005, when the OIG issued six more advisories to the same effect (again, largely due to Goodroe’s efforts). Some of the six had already started their projects prior to the OIG’s opinion, though they had not paid out any money to doctors, says Goodroe.

Then in March 2005, the chairman of the Medicare Payment Advisory Commission recommended that Congress grant HHS the authority to allow gainsharing arrangements between physicians and hospitals, so long as quality of care is maintained and the arrangement does not affect physician referrals. Two months later, senators Chuck Grassley (R-Ia.) and Max Baucus (D-Mont.) introduced the Hospital Fair Competition Act of 2005 (S. 1002), which would direct HHS to establish criteria under which gainsharing could exist. (Today, the Hospital Fair Competition Act of 2005 remains dormant.)

Not the only path
“We’re excited about the overall results” of the six demonstration projects that were approved by the OIG in February 2005, says Goodroe. “And there seems to be continued next-step opportunities [to save more money],” she says. “We now see hospitals in their third year [of gainsharing], and they are still finding opportunities.” That said, the going gets tougher as time goes on, particularly as hospitals and doctors delve deeper into the way that doctors use products and devices.

“It’s really a different way of thinking about healthcare,” says Goodroe. “In healthcare, we’ve never asked the physicians to re-engineer the processes. We’ve always gone to them and said, ‘Would you support this pricing?’” But only physicians can re-engineer the patient care process, she says, and they can only do it with good data.

“They’ve never had the data before. And that’s been one of the reasons we’ve been able to receive approval [for the demonstration projects] – that is, the depth of the data we run.” That data is both clinical and operational, and it helps doctors track their own performance and benchmark it with colleagues around the country, she says.

How about the money?
Gainsharing rests on the proposition that physicians get a percentage of the documented savings that can be tied to their activities – either reduced product usage, use of lower-cost devices, or their agreement to standardize with colleagues on certain physician-preference items. But it’s not just about the money, says Goodroe.

“Gainsharing is not the only thing that works,” she says. In fact, more important is aligning the goals of the hospital and the physician. Surgeons might be more interested in increased staffing. So, instead of receiving cash for their efforts, maybe they can get additional personnel. “It’s all a form of economic alignment, and gainsharing is just one kind,” says Goodroe.

Karen Barrow, vice president, Amerinet Clinical Advantage, has a slightly different view of the concept. “We have to shift from just focusing on cost-savings to improving quality,” says Barrow. “[Quality] has to be the primary factor driving cost-containment. If you improve quality, you can reduce cost.” Certainly, most doctors would support any efforts to improve care, she says.

“We also have to be careful, if we’re going to institute gainsharing plans, not to impede access to technology,” adds Barrow. “That’s a concern everyone has.”

Barrow is not the only one concerned about the impact of gainsharing on technology. Testifying last October before the House Ways and Means Subcommittee on Health, Mark Leahey, executive director of the Medical Device Manufacturers Association, charged that “gainsharing provides physicians with incentives to limit care by using the cheapest alternative or through using only one device vendor …” Device contract gainsharing forces doctors to make unacceptable choices between patient care and larger paychecks, said Leahey.